02 March 2010

England to Sell 3 Year Bonds - In US Dollars

“In the eyes of empire builders men are not men but instruments.” Napoleon Bonaparte

Got Gilts?

Bank of England Plans to Sell 3-Year Bonds in Dollars
By Caroline Hyde and Sonja Cheung
March 02, 2010

March 2 (Bloomberg) -- The Bank of England said it plans to sell three-year bonds in dollars to finance its foreign-exchange reserves.

The U.K. central bank hired Barclays Capital, BNP Paribas SA, Goldman Sachs Group Inc. and JPMorgan Chase & Co. to manage the issue, which will be benchmark in size, it said in a statement. The bank paid 106.2 basis points more than Treasuries when it issued $2 billion of three-year notes in March last year, according to data compiled by Bloomberg.

“The notes will likely receive good investor appetite seeing that it’s a AAA rated name,” said Trevor Welsh, a portfolio manager at London-based Aviva Investors, which manages about 10.5 billion pounds ($14 billion) of fixed-income assets. “This bond sale is purely a technical move for the bank’s foreign currency reserves.”

The Bank of England is seeking to raise funds as confidence in the U.K. currency plummets on concern no party will win an outright majority in a forthcoming general election. The pound weakened 7.6 percent against the dollar this year, the worst performer among the 16 major currencies, as traders bet a new administration won’t be strong enough to reduce the nation’s budget deficit of more than 12 percent.

It will be interesting to see if investors require a slightly higher spread because of sovereign risk,” Welsh said. “But if so, it won’t be more than a couple of basis points.”

The central bank has issued three-year notes in March every year since 2007 to finance foreign-exchange reserves that support its monetary policy objectives, according to the statement.

"Thy glory, O Israel, is slain upon thy high places! how are the mighty fallen!"

What next. Rupees?